Morning Read: Risk On, Bank On

By Brendan Conway

Market check: Stock futures are taking a break after a big rally Tuesday ignited by J.P. Morgan Chase’s (JPM) dividend increase and $15 billion buyback. Major indexes finished at multi-year closing highs and are behaving as though Europe’s debt problems and China’s slowing growth are things of the past — even as Chinese benchmarks fell amid further economic worries in that country. Even the “bad” stress test news isn’t really all that bad to Mr. Market. Citigroup (C), which gained about 6% yesterday, is set to give back only about 4% of that rise despite being the biggest lender to fail the Fed’s latest round of stress tests. Lots of market participants are challenging the relevance of the stress tests, which is clearly helping to cushion the stock: “My view is that they failed a very onerous test that, frankly, is probably unrealistic as we move through the next two years,” Raymond James analyst Michael Rosetells Bloomberg.

Fund watch: Boston-based Acadian Asset Management’s Emerging Markets Portfolio (AEMGX) comes in for review by Dow Jones Newswires’ Leslie Josephs this week, a fund whose Brazil and China bets have paid off lately. The 10-year annualized return is given at near 17% and the three-year return is close to 35%. But the partying won’t go on forever. Acadian CIO John Chisholm sounds a cautious note on mining giant Vale SA (VALE): “With slowing growth in China and lower iron ore prices, [Vale's] revenues and earnings are expected to be lower in 2012 compared to 2011,” he tells Josephs. “Acadian’s evaluation of earnings growth prospects reflects this and contributes negatively to our overall expected return for the company.”

In the news: Lots of notice this morning of a Goldman Sachs (GS) executive director in the derivatives area, or a now-ex executive director, named Greg Smith, slamming the company in the New York Times. But hold on a minute: Aren’t we only a short while past bonus season? And wouldn’t any exec worth his salt either have a bonus in hand by now, or else have a clear sense that his walking papers are coming? “It makes me ill how callously people talk about ripping their clients off. Over the last 12 months I have seen five different managing directors refer to their own clients as ‘muppets,’sometimes over internal e-mail,” Smith writes. Fair enough to criticize such behavior if it’s endemic. But this Op-Ed gives me no reason to believe the author didn’t take his Goldman bonus one last time, which his Op-Ed would have us believe is irremediably tainted money. Or else he didn’t get one this time, and is attempting to launch a post-finance career, or a retirement, in spectacular fashion.

In case you missed it: CBOE Holdings’ (CBOE) Chicago Board Options Exchange and its CFE futures exchange launch a new set of options and futures on oil volatility. We didn’t realize that there is a Market Vectors Rare Earth/Strategic Metals ETF (REMX), which rose 2.8% yesterday amid headlines on the struggle between China and the rest of the world to lift restrictions on this market. It’s featured here on Zacks.com.

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